Reduced tax demand must be reflected in recovery proceedings; sales and stay cancellation without compliance and hearing were void.
Where a tax demand was reduced on appeal, recovery could lawfully continue only if the validating statute's mandatory requirements for intimation of the reduction and continuation on the reduced demand were complied with; proceedings carried on the original demand were invalid, and the resulting sales were void. Cancellation of the stay on incorrect information, without giving the assessee an opportunity to explain, breached natural justice, so the subsequent confirmation of sale was without jurisdiction and possession had to be restored. The Hindu undivided family was treated as competent to challenge the recovery, and the existence of an alternative remedy did not bar Article 226 relief.
Issues: (i) Whether the recovery proceedings and sale of the petitioner's properties remained valid after reduction of the tax demand in appeal without intimation to the Tax Recovery Officer under the validating Act; (ii) Whether the order cancelling the stay and the subsequent confirmation of sale were lawful; (iii) Whether the Hindu undivided family was competent to maintain the petition and whether the existence of an alternative remedy barred relief.
Issue (i): Whether the recovery proceedings and sale of the petitioner's properties remained valid after reduction of the tax demand in appeal without intimation to the Tax Recovery Officer under the validating Act.
Analysis: The original recovery certificate was issued on the basis of the earlier demand. After the demand was reduced in appeal, the validating statute could save the proceedings only if the mandatory requirements relating to intimation of the reduction and continuation of proceedings in relation to the reduced demand were complied with. The retrospective scheme of the Act made those requirements applicable even to earlier notices of demand. Since the reduction was not intimated to the Tax Recovery Officer and the proceedings continued on the footing of the original demand, the statutory conditions were not satisfied.
Conclusion: The recovery proceedings after the reduction of demand were invalid, and the sales made in pursuance of them were void.
Issue (ii): Whether the order cancelling the stay and the subsequent confirmation of sale were lawful.
Analysis: The stay order was vacated on the basis of incorrect information and without giving the petitioner an opportunity to explain the alleged suppression of facts. That action offended the principles of natural justice. While the stay order remained operative, the sales could not lawfully be confirmed. The confirmation was therefore made without jurisdiction, and the delivery of possession pursuant to that confirmation deprived the petitioner of property without authority of law.
Conclusion: The order cancelling the stay and the order confirming the sales were unlawful and were set aside; restoration of possession was directed.
Issue (iii): Whether the Hindu undivided family was competent to maintain the petition and whether the existence of an alternative remedy barred relief.
Analysis: For income-tax purposes, the family continued to be treated as a Hindu undivided family in the absence of a recorded finding of partition. The legal fiction preserving its status for tax purposes extended to a challenge against the very recovery proceedings taken against it. The availability of another remedy did not oust jurisdiction under Article 226, particularly where infringement of fundamental rights was established.
Conclusion: The petition was maintainable, and the existence of an alternative remedy did not preclude relief.
Final Conclusion: The petitioner succeeded in challenging the post-reduction recovery measures, the sale confirmations, and the cancellation of stay, and was entitled to restoration of the auctioned properties.
Ratio Decidendi: Where a tax demand is reduced in appeal, recovery proceedings can continue only in accordance with the mandatory statutory requirements governing intimation and continuation on the reduced demand; proceedings continued on the unreduced demand without compliance are void, and orders passed in breach of natural justice are liable to be quashed under Article 226.
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